Speculative development returns to industrial

With demand high but available units increasingly scarce, developers are back in the speculative mind-set, particularly in the mid-range unit size of between 100,000 sq ft and 200,000 sq ft.

Several design-and-build deals have been secured in recent months and there has been an increase in contractors making large prime sites shovel-ready.

Rumoured speculative developments in the pipeline include 175,000 sq ft by Peel at Liverpool International Business Park, two units of 100,000 sq ft and 140,000 sq ft at Trafford Point by Harbert, and 300,000 sq ft by Canmoor at Haydock.

Julien Kenny-Levick, director at Colliers International, expects this trend to continue: “Warehouses of 150,000 sq ft to 250,000 sq ft are the sweet spot for developers, as there are still a number of unsatisfied requirements in that range. Before the end of the year, expect to see marriages between developers and funders under contract, with frames coming out of the ground.”

There are available sites around the region for sheds of even greater size. Knowsley 700, a 45-acre Peel Logistics project, is a cleared site intended for design-and-build units of more than 700,000 sq ft. Peel is also active in Port Cheshire, a 75-acre multi-modal site with consent for developments of up to 1m sq ft or a selection of smaller units. According to Jonathan Thorne of B8 Real Estate, agent on the site with JLL, the target occupier is a manufacturer or retailer.

There is still unmet demand in the market. Fashion brand Missguided is looking for a 200,000 sq ft unit close to its current site in Trafford Park, while a 250,000 sq ft occupier associated with the Jaguar Land Rover supply chain needs to be in situ by April.

Jason Print, director of Cushman & Wakefield, said: “There is a mixed bag of requirements, with manufacturers and quasi-distributors returning to the market with unit needs of around 50,000 sq ft. Automotive demand is particularly high, which is a good barometer of the market at the moment. The relocation of Jaguar Land Rover brought with it subsequent needs from within its supply chain.”

Large shed schemes are dominated by Omega Warrington, with outline planning permission granted in Omega South for 2.1m sq ft of logistics space. A 680,000 sq ft facility is earmarked for occupation by the Hut Group, and large pre-lets remain the key target rather than a smattering of smaller units.

Around 10 deals have completed in the North West so far in 2014 on units of more than 100,000 sq ft, and a recent report from B8 Real Estate shows that appetite remains high, with around 4m sq ft understood to be under offer halfway through H2.

The general sentiment around the market is that speculative developments are unlikely to get above 200,000 sq ft, with the largest occupiers looking for a bespoke offering.

According to Tony O’Keefe, director of DTZ, Omega and Logistics North continue to be the sites to watch: “Expect Logistics North to become particularly prominent, with outline planning permission for 4m sq ft and infrastructure works on site. For sheds of more than 300,000 sq ft, the number of sites to accommodate that size is limited; there are really only three or four locations.

“Take up over the last three or four years has been focused along the M6 or the wider Manchester conurbation, unless there is a specific geographical need associated with the requirement, such as Johnson Controls’ move to Knowsley [to be close to Jaguar Land Rover]. More footloose occupiers are likely to take space in the traditional industrial core.

“It is an encouraging market at the moment, which is helped by the supply dynamic, with less than year’s supply available. We may well see more than 750,000 sq ft of speculative development over the next 18 months.”

According to the CBRE North West H1 logistics report published in July, design-and-build transactions are at an advanced stage in key development sites such as 6-61 Bolton at Wingates Industrial Estate, Epic Wigan in South Lancashire and Airport City Manchester.

Mike Walker, senior director of industrial at CBRE, said: “If an occupier wants a unit of more than 100,000 sq ft, there is very little choice but design-and-build.

“Warrington is still a key market – it is a very good place to have a distribution shed. If there is land available in Warrington, to a developer and a funder you can expect it to be very popular.”